EP. 29 — THE POWER OF MEGADONORS

(Transcripts may contain errors. Please check the corresponding audio before quoting in print.)

Weston Wamp: I'm Weston Wamp, and this is Swamp Stories, presented by Issue One.

Senator Bernie Sanders: And I’ll tell you who has the power. It’s the people who contribute money — the billionaires who contribute money to political campaigns. Who control the legislative agenda. Those people have the power. 

Weston Wamp: Just 12 donors have contributed a combined $3.4 billion to federal candidates and political groups — since the Supreme Court changed the landscape of money in American politics with its Citizens United decision. These donors are responsible for about one in every $13 that’s been spent in federal elections.

Six of the 12 donors are Republicans, six Democrats, and among the better known of these megadonors are Michael Bloomberg and the late casino magnate Sheldon Adelson.

That’s according to a highly publicized report recently released by Issue One. 

It’s frankly jaw-dropping that it’s even possible for so few to be responsible for so much of the money that flows into the American political machine.

While Citizens United opened the floodgates, it’s important to understand that it didn’t come with an instruction manual for how exactly billionaires could use this new super PAC playground to their advantage. But after years of experimentation with different tactics, loopholes, and strategies, one of Silicon Valley’s savviest entrepreneurs and investors is updating an old gameplan to put his mark on the U.S. Senate in the 2022 election cycle. 

His strategy already appears to be having an impact. And if it proves effective — meaning his preferred candidates win — many of the worst fears about super PACs could be realized.

This is Episode 29 — The Power of Megadonors

Sheila Krumholz: This is a kind of tug of war over what the right balance is to allow for unfettered speech but also to keep an eye on, again, what the consequences are of that. We don't want to return to the days of this senator brought to you by Standard Oil, or this copper baron, buying a seat in Congress.

Weston Wamp: Sheila Krumholz is the Executive Director of OpenSecrets.org whose research and campaign finance database has brought invaluable accountability to federal campaigns in the internet age.

Sheila Krumholz: It's not quite that brazen, but we're not too many steps behind that when a megadonor, such as we're seeing recently, very recently, with PayPal co-founder, Peter Thiel, plunking down $10 million into super PACs, again, not the candidate's campaign account, but one step removed, a super PAC that can accept unlimited donations from a single person or a single corporation and direct it exclusively in support of one candidate.

Weston Wamp: For better or worse, raising a lot of money is the most significant hurdle to running for Congress — House or Senate. Donors can give no more than $2,900 per election, so a multimillion dollar political campaign is first and foremost a fundraising campaign. Contribution limits are one of the ways our campaign finance laws work to reduce political corruption.

But in the relatively new rules of the super PAC game, an enterprising billionaire could effectively treat the U.S. Senate like the Kentucky Derby — except in this race, one person could theoretically own most of the horses.  

When so called super PACs came on the campaign scene, many of us who have spent a lot of time around campaigns shivered. For all intents and purposes, contribution limits — which are meant to protect against corruption and the appearance of corruption — went out the window. All you needed was a super PAC and a single donor willing to donate enough money to instantly make any person a viable candidate for office. We wondered whether overnight, we’d see corporate-sponsored candidates or billionaire sponsored candidates for that matter. But the history so far has been a bit murkier. 

Sheila Krumholz: There was a lot of hand-wringing around the time of Citizens United, because corporations have vast resources that they could deploy in politics. Suddenly they were allowed to play in the sandbox, and so there was great worry. That hasn't really been borne out.

There are some corporations that are spending directly to support particular super PACs and candidates, but I think there have been a number of instances where corporations have been, there's been a backlash to their political involvement. So it comes with a risk, and corporations are usually famously risk averse. 

Weston Wamp: That may be one reason that some of America’s most famous billionaires — Gates, Bezos, Zuckerberg, Musk — aren’t megadonors. But they’re all connected to millions of corporate dollars trying to influence the decisions that are made in Washington, D.C. But other billionaires are investing directly in candidates — in alarming ways. It’s a new paradigm based on an old gameplan of bankrolling candidates.

There is one billionaire, as Krumholz mentioned, that has made the decision to go all in. Peter Thiel, who’s the billionaire venture capitalist and founder of PayPal and Palantir, jumped into the spotlight when he was publicly embraced by President Trump.

Thiel, like many billionaires, has given millions in political donations, including a $1.2 million gift to a Trump-aligned super PAC. But $1 million dollars in a presidential race these days is a drop in the bucket.

With the U.S. Senate deadlocked at 50-50, Thiel appears to have a new strategy: early investments in personally selected candidates.

In Ohio, J.D. Vance, the author of the bestseller “Hillbilly Elegy,” has been kicking the tires on his own U.S. Senate run. But the political neophyte was vaulted into serious contender status immediately when Peter Thiel gave $10 million dollars to a super PAC established in support of Vance’s yet-to-be-announced candidacy.

Subsequently, Thiel made another $10 million super PAC commitment to an employee of his eyeing a run for the U.S. in Arizona. 

Now, neither Vance nor Blake Masters have the resumes of formidable Senate candidates. But they’re both smart, articulate, and, maybe most importantly, ideologically aligned with their angel investor, Peter Thiel. And when you start your political career with $10 million in the bank, you have a distinct advantage. Another candidate without such a megadonor would have to get 10,000 people to give $1,000 a piece just to catch up.

The last few months have shown just how powerful one seat in the U.S. Senate can be. Let alone two. And frankly, as much as $10 million is to you and I, there’s nothing stopping Thiel, who Forbes estimates to be worth $5 billion, from doing this over and over again.

To put it another way: 

Sheila Krumholz: Although small donors are making up a bigger portion of the money, and I think overall that's a good thing, and that's true for donors to the right and left, it still can't hold a candle to the power that one single wealthy billionaire can wield.

Weston Wamp: So if the worst fears of Citizens United are in fact realized, what could happen?

Sheila Krumholz: It has become really, in a way, I think, a facade of transparency, a facade of limits. If we don't have limits, if one person really can just hand over $10 million to somebody who wants to run for Congress, what does that person owe to that donor? Is that donor effectively buying a seat in Congress? These are real questions that I think we need to grapple with.

We're following the news every day. We're seeing who's running and where their money's coming from, but I don't think we all get a chance to sit back and say, “Where are we on that scale of freedom of speech versus corruption, or the appearance of corruption?" And the appearance of corruption is important because we don't want people to grow so cynical that they think, “Well, everybody's bought and sold. I'm not going to vote.” We want people to understand what's going on. Transparency is essential for that.

Weston Wamp: The super PAC era has come with plenty of surprises. For example: not every megadonor who has participated has walked away pleased with their experience. Charles Koch, who developed a reputation along with his brother as a power player in the super PAC game recently lamented their partisan approach saying quote “Boy, did we screw up.”

The same outcome is possible for Thiel, to be sure. 

And while it’s pretty clear that Vance and Masters won’t waltz into the Senate, their expedited rise from unknown to formidable statewide candidate is made possible by super PACs, which more and more seem to mean anything is possible in American elections.

Now, there’s a feeling in places like Tennesesee, where I live, that the country and our politics is influenced primarily by echo chambers on both of the coasts. Well, the same Issue One report that detailed the $3.4 billion spent by just 12 megadonors also took a look into the ZIP codes which predominantly fund our politics. 

Residents living in the 100 top-giving ZIP codes in America account for less than 1% of the U.S. population, but donors living in these ZIP codes accounted for about 20% of the money raised in federal politics between 2009 and 2020. Sure enough, there’s a statistical basis for the claims that coastal elites dominate our politics.

Sheila Krumholz: This is not your rank-and-file Americans who are ponying up the money. These are elites, very influential elites, coming from exclusive neighborhoods where most of us can't afford to live. So what does it say if our politics are being funded to such a huge degree by just a concentration of wealth in the tony sections of San Francisco and the Upper East and Upper West Side of New York.

Weston Wamp: Likewise, the diversity of these top donor ZIP codes typically lags significantly behind the country as a whole. This is what the concentration of power looks like in the modern age.

Sheila Krumholz: We also need to be factual and not too hyped up about, “Oh, it's this side, or it's that side, or it's this donor.” It's more systemic. We need to be paying attention to the horizon, eyes on the prize. We want to protect the system from anybody, left, right, or center, having the ability to skew our political system away from the public good and toward their narrow interests. That is why, to our mind, transparency is just a non-negotiable.

Weston Wamp: Krumholz believes the megadonor trends in American politics reflect often broader societal trends. And if we want democracy to flourish, we had better pay attention.

Sheila Krumholz: I think what it says about our system is that we are on a trajectory that is creating just more and more and more inequity in our political system, in our society. It's reflective of what's going on in a broader sense. So this is maybe not shocking or news to most Americans, but it is, I think, especially troubling, because we are so proud of our democracy being the cornerstone of equality. One person, one vote, is something that every kid learns in school, and it is something to be proud of. That's not something to be taken for granted. We need to really take a clear-eyed look at what's happening in how our politics are being run and what the consequences are of that.

Weston Wamp: On the next episode of Swamp Stories, we’re going to investigate yet another phenomena of the super PAC era, and arguably the swampiest yet: scam PACs. Everyday Americans of all political stripes have been scammed by con men running PACs claiming to support issues they care about. The Wild West of the super PAC industry has enabled grifters like these and it's time for a bipartisan solution.

Weston Wamp: Thanks for listening to Swamp Stories, presented by Issue One, the country's leading political reform organization that unites Republicans, Democrats, and Independents to fix our broken political system. Please subscribe to the podcast and share it with your friends. Even better, rate and review it on iTunes to help us reach more listeners. You can find out more at swampstories.org. I'm your host Weston Wamp. A special thank you to executive producer, Ethan Rome, senior producer Evan Ottenfeld, producer Sydney Richards, and editor Parker from ParkerPodcasting.com. Swamp Stories was recorded in Tennessee, edited in Texas and can be found wherever you listen to podcasts.

HOW TO LISTEN